Returns recorded by Migros Pensionskasse (MPK), the pension fund for the Swiss retailer, increased to 6.6% last year, from 3.7% a year earlier, driven by positive equity and gold markets, the scheme said in a statement, as pension funds in Switzerland look for alternatives to traditional, volatile asset classes.
MPK closed 2024 with an income surplus of CHF747.9m. As a result, assets under management went up by CHF1.2bn year-on-year in 2024 to CHF29.4bn, it said.
MPK last year allocated 31.8% of total assets to nominal value investments, 28.2% in equities, 37.4% in real estate, and 2.6% in gold, it added.
The pension fund has turned to a riskier investment strategy for the period 2025-2029, increasing investments in infrastructure and equities, and reducing nominal value investments. MPK will also increase allocations to gold by 1 percentage point to 3% of total assets.
The pension scheme decided to increase its gold allocation as inflation picked up in the last few years, and previous investments in the asset class proved to be successful, chief executive officer Christoph Ryter said.
The positive returns achieved in the last year have led to a further improvement of MPK’s financial situation, with its funding ratio at 132.8% in 2024, up from 129.4% in 2023.
Looking for alternatives to alternatives
Swiss pension funds invest a small share of assets in gold (3-5% of total assets), considering mainly tail risk hedging and diversification as reasons to invest in the asset class, and to a lesser extent returns, according to consultancy Complementa.
However, at a time when traditional asset classes such as equities, bonds and real estate are volatile, Swiss pension funds are increasingly looking for alternative ways to achieve stable long-term returns, Stephan Wildner, country head and director of retirement service at WTW Switzerland, wrote in a paper.
Swiss schemes have looked at alternative asset classes such as private equity, insurance-linked securities and hedge funds, for many years to top up returns.
More recently, cryptocurrencies, gold, infrastructure projects, renewable energies and even works of art have become the topic of discussion in investment committees of Swiss pension schemes, as they are a promising diversification tool, according to WTW.
Unconventional asset classes require an “appropriate governance budget” on the pension fund side, specialised knowledge, careful due diligence, bearing in mind the lack of liquidity especially for schemes with negative cash flows, Wildner added.
Despite these challenges, new asset classes are a “valuable addition” to the portfolios of pension funds willing to think outside the box and explore innovative ways to fund retirement provision, he added.
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